Covenant Bank must raise at least $2 million, regulators say

(Crain's) — Covenant Bank, the West Side lender run by the high-profile megachurch pastor Bill Winston, is under regulatory orders to boost capital by at least $2 million.

A June 6 consent order between the bank and state and federal bank regulators, released Friday, requires Covenant within 60 days to hold capital at levels well above what regulators normally require. Bank President Herman Davis said a capital-raising campaign is under way, with a goal of raising as much as $5 million.

Covenant, with $69 million in assets, was formed after Rev. Winston led a 2008 purchase of Community Bank of Lawndale, an African-American-owned bank that had been purchased by an Asian-American-owned bank, provoking protests in its West Side neighborhood.

Rev. Winston runs the 19,000-member Living Word Christian Center in west suburban Forest Park, which also owns the shopping mall in which the megachurch is housed.

Rev. Winston financed the $5-million purchase in no small part through small equity stakes held by church members. But this time around, the bank is going after bigger hitters, Mr. Davis said.

“We don’t have time to do it through the small-investor approach,” he said.

The bank is targeting investors “who are very much concerned about underserved communities,” he added. Qualified shareholders must have a net worth of at least $1 million.

Covenant Bank isn’t profitable. It posted a loss of $372,000 for last year and $226,000 for the first quarter of 2011. Mr. Davis said the bank needs to boost assets to at least $100 million to become consistently profitable.

Rev. Winston, who is chairman of Covenant Bank, spearheaded the purchase of the Lawndale bank after years of trying to break into the industry as a means of fostering economic growth in low-income black communities.

His other businesses include a television ministry and a business school on the premises of the sprawling church complex.